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American Red Cross CEO: What Corporate America Can Learn From Nonprofits

May 10, 2016, 9:00 AM UTC
Business people huddled around paperwork on table
Photograph by Robert Daly — Getty Images/OJO Images RF

Prior to joining the American Red Cross in 2008, most of my career had been in the private sector – at AT&T and Fidelity Investments. Often when an executive comes from the corporate world to a nonprofit, it’s expected that he or she will inject some business discipline. While my team and I applied business skills to bring financial stability to the Red Cross, working in a nonprofit has also taught me many valuable lessons that I believe are very useful for leaders in the private sector. However, like corporate America, the nonprofit world has its challenges, and there are plenty of lessons nonprofits can learn from the private sector. Here are the three big ones for each:

What Businesses Can Learn from Nonprofits

Focus on the people you serve. At the Red Cross, our bottom line is our mission. The people we help come first and we absolutely cannot let them down – it’s often a matter of life and death. We have to see everything through the lens of our donors and the people we serve. Similar to a nonprofit, a successful business must also keep a laser-like focus on those they serve – namely their shareholders and customers. If companies can inspire the same passion and willingness to serve that’s innate in nonprofit employees and volunteers, they’ll be even more successful.

Motivate through the power of your ideas, not the power of your office. In the corporate world, I’d make a decision and employees would generally fall in line. At the Red Cross, we rely on the commitment of about 330,000 volunteers, and that takes a very different leadership approach. Obviously, you can’t motivate volunteers through financial incentives or benefits; you must gain their buy-in and commitment by demonstrating that your actions will improve their ability to serve people in need. I believe that this approach is a successful way to encourage and inspire employees in the for-profit world as well.

Lead with your heart and your head. After nearly eight years working with our remarkable volunteers, employees, donors and partners, I believe that all people have a need to be a part of something bigger than themselves, and that every institution has a higher purpose. At AT&T, we weren’t just providing long-distance telecommunications; we were connecting people to the information they needed and to the people they love. At Fidelity Investments, we weren’t just managing money – we were helping people fulfill their financial dreams. When you instill a sense of purpose, you can lead with your heart, as well as your head, and that allows you to inspire and motivate your workforce.

What Nonprofits Can Learn from Businesses

Instill a culture of fiscal accountability. Most nonprofits are so dedicated to helping others that the bottom line is often a secondary concern. But to truly fulfill their mission, nonprofits must make the tough financial choices necessary to reign in expenses. When I started at the Red Cross, it was facing a $209 million annual operating deficit and was more than $600 million in debt. Our chapters around the country were each operating as independent entities. One of my top priorities was to consolidate and centralize support services and back-office functions such as IT, payroll, HR, and marketing. These changes have allowed us to cut management and general overhead expenses by nearly 50% over the past eight years, which means more of our donor dollars go towards the services we provide.

Invest in your people. As with any successful organization, nonprofits must attract, retain and motivate the best people. Non-profit workers are attracted by the mission, but they have the same desire as employees in business to learn and grow and advance in their careers. We have introduced a talent development program borrowed from my time in the private sector. It is designed to give managers experience in all areas of the organization and it is developing the future leaders of the American Red Cross.

Embrace change. If you don’t embrace change you won’t survive in either the corporate or nonprofit world, because these days everything is changing. At the Red Cross, we have leveraged new forms of technology to enhance our mission delivery. We’ve been able to connect with more people around the world through our suite of free mobile preparedness apps, our pioneering use of Text REDCROSS to 90999 for fundraising and our tremendous presence on social media. Who would have thought that a 135-year old institution could have more than 2.65 million followers on Twitter?

Gail McGovern is President & CEO of American Red Cross.